Intraday Trade Using Gann Method
I found W.D.Gann's method of geometric proportion is one of the best method for intraday trading. Though W.D.Gann was not a stock trader but after many years of experiment in stock market i found this method is one of the most successful method for day traders. Gann's Method is devised into two parts.
- A. Forecasting the price and time using the natural numbers , geometrical angles and specific geometrical figures.
- B. Forecasting the price and time based on astrological angles,formations and geometrical figures.
How it is different from the technical analysis?
In technical analysis we often use averages,drawing tools like trend lines,various oscillators and indicators to derive the future price projection which may be translated in the general terms resistances,supports,targets,stop loss.
However in gann method we use harmonic rhythms. like I can say price 30 degree up from the current level or down from the current level will give me the resistance or support. If you will notice my words carefully I have not used any drawing tools or any statistical values for deriving this resistance or support.
You must ask me, Why such assumption ?
This is the wonderful discovery done by W.D.Gann. He is the man who fond that in this universe every number is associated with other numbers with some degree relationship. This conclusion he has derived after arranging the natural numbers in geometrical spiral of square, triangle, hexagon. At last i will say, we all will agree that the price of a stock or commodity or any financial instrument irrespective of the currency it is trading in, is a number only.
How one can do intraday trade using gann method ?
Though many different approach and methods I have describe on my book on Gann Method but one of the simplest method is projection the price from static degree proportions. In this method we will follow the following procedure and assumption.
- A. We will assume the 180 degree as number 1.
- B. We will derive the resistances from the low and supports from the high in every 15 degree interval.
- C. In the price cross over of 30 degree in resistance side we will buy the stock and vice-verse.
Do remember we will use this method for making swing trade. That means we will close our buy position at the sell entry point and initiate fresh short at that point. Some time we will come across with the situation where in the buy entry and sell entry will be placed very close to each other even equal to each other. This is called congestion band. If congestion band present in my experiment then I will make entry on the 1st target points.
Say I have identified day high and low of State Bank of India (SBI) as 2220 and 2176 at a particular time and currently SBI is trading at 2187. if I wish to enter a trade based on this procedure then I will do the following.
- A. Assuming 180 degree as 1 the 15 degree will be 0.0833.
- B. My resistances will be two square of (square root of LOW+0.0833), two square of (square root of LOW+0.0833*2), two square of (square root of LOW+0.0833*3) and so on. In SBI case it will be 2183.78, 2191.57, 2199.37, 2207.19, 2115.03, 2222.88. Supports will two square of (square root of HIGH-0.0833), two square of (square root of HIGH-0.0833*2), two square of (square root of HIGH-0.0833*3) and so on. In SBI case it will be 2112.16, 2204.33, 2196.51, 2188.71, 2181.
Now I will conclude my experiment with following out come my buy entry is 2191.57 and sell entry is 2204.33. In this case the sell entry is higher than the buy entry price and the current price also below my buy entry price. If such a situation exists then I will place my buy entry stop loss 2183.58 and sell entry stop loss as 2112.16.
What will be my swing trading decision in this case?
If the stop loss triggered for me after a failed attempt of buy entry then I will close the buy trade at 2183.78 and initiate fresh short trade at that point with stop loss for 2191.5 and targets will be 2176.06,2168.34... this is derived by subtracting the difference of 2183.78 and 2191.5 from 2183.78. same way you can derive the targets for the long entry if the stop loss of 2112.16 trigger.